Carbon Credits

Climatecoin, an Ethereum-based cryptocurrency, has partnered with a carbon credit exchange in an effort to help in the fight against climate change. The move is expected to lead to the creation of the world’s first blockchain-based platform for carbon credits trading.

Carbon emissions are wreaking havoc on our environment, and one way the world is attempting to combat this problem is through the use of carbon credits, an approach agreed upon by most of the world’s nations through an international treaty called the Kyoto Protocol.

The idea behind the system is that everyone has a limit to the emissions they can produce. If a nation wants to exceed its limit, it must purchase a carbon credit. Each of these carbon credits serves as a permit to produce a certain amount of emissions; for example, one credit might equal one ton of carbon dioxide emissions.

If an entity ends up with extra carbon credits, it can trade them to others on markets such as the European Union’s Emissions Trading System (ETS).

From this system emerged voluntary carbon offsets. These give companies and consumers the ability to pay a certain amount to offset their own emissions. For example, an airline might ask passengers if they want to pay an extra $20 when purchasing a ticket to offset the emissions caused by their flight.

The money used to purchase carbon credits and offsets is given to projects attempting to help the environment, such as by developing renewable energy systems or protecting forests.

These credits give purchasers a way to effectively cancel out the amount of emissions they produce. They’re doing something bad to the environment, so they give money to someone attempting to do something good for it.

Recently, cryptocurrency mining’s negative impact on the environment has been the focus of much attention. According to a study by PowerCompare, a U.K.-based energy comparison tariff service, if bitcoin miners were a nation, they would rank 61st in the world in terms of electricity consumption.

Climatecoin aims to help individuals take part in the emerging crypto market while also assisting in the fight against climate change. Each token is “stapled” to a carbon credit, and climatecoin owners can use the tokens to purchase carbon credits on the Carbon Trade Exchange (CTX).

According to a Medium post from the company, money from the token sale will be invested into environmental businesses, making climatecoin the “first carbon-zero cryptocurrency in the world.”

In the past, carbon trading schemes have been criticized because of their volatility. Prices on the ETS have fallen almost 70 percent since 2008, leading to an overhaul of the system.

Offset programs have also been criticized as simply public relations tools that allow companies to avoid addressing their impact on the environment. Tracking the money is also next to impossible, and companies could claim to be using it for environmental purposes while simply pocketing it.

Blockchain is currently the most promising ledger technology available, so using it to track carbon credits/offsets could solve some of these problems. With the planet’s carbon dioxide levels higher now than they’ve been in millions of years, any action that addresses the emissions problem is worth considering.

Blockchain: Accessing Its Value

January 15, 2018

Current blog posts and business journals contain active discussions on blockchain concepts, offering varied views about its impact and sustainability. These published pieces are creating confusion for business leaders due to an apparent lack of agreement on the impacts of the blockchain process and, more importantly, uncertainty about blockchain's complex association with bitcoin.

Many perplexed readers may be inclined to ignore blockchain concepts or defer consideration until clearer information and evidence are available. However, disregarding blockchain rather than actively understanding it could put an organization, including captive insurers, at a competitive disadvantage compared to others who move to embrace its full context. With or without blockchain, fundamental changes in business processes and value propositions are rapidly underway. Business paradigms are important frameworks, but operational processes and practices, along with enabling technology, are being implemented in quests for efficiencies and value creation.  

Business is often conducted through a series of activities or processes to acquire or modify an asset(s), forming a transaction network. These activities are performed by separate and distinct parties, entities, or departments. Blockchain is a methodology to document the financial value of the acquisition or modification activities associated with both tangible and intangible assets. The network participants consist of parties who have an economic stake in the transaction outcomes. This process can all be accomplished using a distributed or shared ledger, facilitated by technology and controlled by security protocols for authorized parties. Others, such as regulators, may be given visibility into the proceedings. Network participants approve the progress of the various steps in the execution of the transaction, forming chain-like documentation of the business activities from their beginning to completion or delivery. Through this process, blockchain ensures that the asset transaction is secure, timely, accurate, and auditable.1  

Bitcoin, on the other hand, is a cryptocurrency whose exchange and trade are conducted via a blockchain network, which is described above. It can be compared to cash and is used to complete buying/selling events or currency trading. Both buying/selling events and currency trading are currently being conducted without the benefit of some critical elements of monetary policy and regulatory oversight, generating significant market volatility in bitcoin value. Its freewheeling nature creates concern for many. In contrast, the technology-enabled blockchain processes are attracting significant interest for applications in business transactions within many industries and settings.

Blockchain was designed to enhance business transactions. It was developed as a process to address the need for an improved, efficient, cost-effective, trusted system for conducting and recording the financial and contractual aspects of business. In operational terms, these transactions are commonly called value streams. The centerpiece of the blockchain methodology is the recording of the financial or accounting impacts associated with the transfer of an asset and the value added to the asset as it moves through the acquisition or modification steps. As an asset moves through the business transaction, the aggregation of steps form a chain of custody and actions, completing the entire process.

Blockchain enables the building of trust among business participants as the asset moves through the transaction chain. Participants are typically given a view of where the asset is at any point. The blockchain process can reduce the cycle time, resulting in efficient and effective translation completion. With blockchain, the business transaction is also considered to be trusted because it provides the ability to audit the entire transaction from end to end. Network participants can rely on the integrity of the process, as each participant approves the completion of each chain link in the process.2

The business benefits of blockchain can be consolidated into three major categories: time savings, cost savings, and tighter security. Other benefits that can be derived from these include enhanced privacy, improved auditability, and increased operational efficiency.3

A focus on cost savings and increased operational efficiencies allows the benefits of and interest in blockchain to become clearer and better understood. At the Connecticut Captive Insurance Association Collaborative on October 26, 2017, keynote speaker Glenn Finch, vice president and cognitive innovation officer at IBM, discussed "process reimagination." This practice looks at fragmented business transactions (or value streams) to identify opportunities for improving business outcomes. Essentially, process reimagination examines both tangible and intangible assets through the lens of technology. It identifies opportunities to enhance the ability to manage (or move) an asset, add additional value, and make better decisions. Mr. Finch stated that, according to a recent survey, a significant number of responding chief financial officers (66 percent) have established key objectives for improving operational efficiency.4In this context, the growing interest in enhanced, economical outcomes associated with blockchain can be understood.

Certain business transactions lend themselves better to the benefits derived through using blockchain processes. Inspired industries appear to share some common attributes: a high degree of regulation, a reliance on cost estimates in completing asset transactions, and a dependency on value-added production in the delivery of products and services. Specific industries that come to mind include insurance, reinsurance, risk management, health care, retail, construction, and component aggregators (e.g., aerospace).

Interest in and the promise of blockchain are growing, and we will undoubtedly see its application in many settings. However, one key aspect that must be remembered is that blockchain exists at the intersection of process and technology—its full value lies with evolving processes that impact how business transactions are facilitated and conducted, in addition to determining how the value stream is measured as the assets move through the transaction process. Blockchain offers great potential benefits to prospective users if the elements of process improvement, capital management, and technology are all considered in structuring and adopting an enhanced business model. Blockchain will almost always enhance the value stream, but redesigning operational processes and organization around blockchain increases the value outcomes further.

At a December 2017 New York City Bar Association event, a panel discussed blockchain within the financial services sectors. Paul Meeusen, the head of distributed ledger technology at Swiss Re, Ltd., in Zurich, was quoted as saying, "If there is one industry where the time value of money is key, it's insurance." Mr. Meeusen went on to say, "… there's a lot of frictional costs lost across the [insurance] value chain."5

The insurance and reinsurance industries utilize complex business processes. A risk transfer process, for example, involves multiple parties or participants who assess risk, determine how much risk they will retain, assume that risk, and then transfer unretained risk to other parties or risk takers. The completion of these steps involves multiple transactions, complex accounting ledger entries, and extended time lines. The risk asset is valued in the form of risk premium calculations or estimates. Only a portion of the premium is allocated to the payment for contractual obligations associated with damages to an insured asset or damages to a third party.

A widely held consensus is that between 25 and 40 percent of risk premium charges or estimates are associated with expenses. These are frictional costs; therefore, as little as 60 percent of the risk premium may be associated with risk acceptance and available for paying potential claims. The complex process of risk transfer and acceptance is an example of a business transaction that may be improved through the adoption of enhanced business processes like blockchain. Process improvement may be seen in both efficiency (process cost) as well as improved precision in setting risk premiums.

At an annual EY insurance executive forum held in New York City in December 2017, several key trends were cited regarding the convergence of technology, business acumen, and risk management. The speakers and panelists noted that all segments of the insurance and reinsurance value chain are being reevaluated. Opportunities are being sought to enhance current business practices in order to improve efficiencies and execution and ultimately enhance operating returns for an industry that is considered "highly refined and remarkably well capitalized." All areas are under review, including distribution, underwriting, claims, and operations.6

How do this potential transformation and its expected benefits play out? As noted, transformation is occurring in many places, with a focus on various aspects of the insurance and reinsurance value chain. Perhaps one of the most interesting areas is the captive insurance arena. Captive insurance programs are complex insurance/reinsurance structures that apply additional key work steps for risk and asset management. They introduce more interfaces, handoffs, and accounting (ledger) entries into the value stream. With the observed frictional costs in these transactions, blockchain appears to be particularly well suited for bringing increased value, efficiency, security, and customer satisfaction. 

Leading risk consultants, captive managers, insurance brokers, and their clients are already at work applying the principles of blockchain to these programs. Expect to see interesting innovations that go well beyond distribution and accounting. Exciting opportunities are emerging as new transaction parties join the blockchain network. Existing roles and responsibilities may be redistributed or reassigned. What appears to be disruptive and painful on the surface may very well provide enhanced financial returns for captive insurance and risk management stakeholders. Interesting times lay ahead for those committed to process improvement and value creation. They stand to reap the benefits associated with these enhanced business practices, facilitated by technology.

Credible Carbon see:  https://www.crediblecarbon.com

Can market trades really address climate change?

Of course not. The solutions to climate change will necessarily be political, social and maybe economic. But markets provide an instrument to encourage action once these political and social changes have happened. It is important that this instrument is as effective as possible. It is of course not the only instrument available for the reduction of greenhouse gases and should be used in combination with taxation, regulation and increasing awareness.

What is a "vintage" - I thought that was for wine?

Carbon credit vintages refer to the specific year in which the emissions being traded were saved at the project. This is important to prevent double counting and fraudulent claims about being “carbon neutral”.

What do we mean by "Credible Carbon" investment?

Credible Carbon projects align with the principles of either the UNFCCC’s CDM, Gold Standard processes for carbon trading, or with UK standards for voluntary projects. All projects result in a quantifiable reduction in greenhouse gas emissions and in poverty. Investors in Credible Carbon projects are provided with real-time information on how the money has been spent and on project progress.

I've heard of other companies that ask for carbon offset contributions. Why does Credible Carbon claim to be more "credible" than them?

Credible Carbon is an African company, managed for the benefit of Africa. All projects registered by Credible Carbon aim to be locally relevant. The benefits of investments in Credible Carbon projects are not haemorrhaged to industrialised countries. This is important in terms of Africa’s exposure to the impacts of climate change. Credible Carbon is usually better-placed to understand the local conditions in Africa than overseas-based carbon registries and so we can make sure that any carbon offset contributions are invested in credible activities. The nature of Credible Carbon projects is defined by local people and is not dictated to by the need to return shareholder profits or economies of scale.

Isn't carbon trading distracting people from the real challenge of reducing their emissions?

Credible Carbon encourages all investors to consider ways to reduce their emissions and proposes some easy steps that investors can follow. Investment in renewable technologies in developing countries typically has a far greater impact on emissions reductions than the same investment in industrialised countries, where things are more expensive to change. By investing in renewable energy projects in developing countries, Credible Carbon is assisting these countries to follow a development path that will not involve the same level of emissions as the development of current industrialised countries. Developing in-country investment in renewable energy places these countries at the forefront of emerging renewable sectors.

Will my contribution make any real difference to climate change?

Global warming is now accepted as one of the most serious threats to the future of all people on the planet. We must all take urgent action to reduce the amount of greenhouse gases that are currently being produced. The first step is to be more efficient when using energy – cutting down how much energy we use will reduce the amount of greenhouse gas that is emitted. When we can’t easily cut our energy use any more, making a carbon offset contribution will allow Credible Carbon to make carbon savings in Africa that will help to compensate for your carbon emissions.

What sort of organisation is PACE and how is it related to Credible Carbon?

PACE is registered in South Africa as a “voluntary association” or “Universitas”. The Association is a public, not-for-profit organisation (055-238-NPO). PACE has the support of South Africa’s Designated National Authority (DNA) in the Department of Energy.  PACE was established in 2004 with a one year grant funding from the UK Foreign and Commonwealth Office, its mission then was to make small-scale CDM work in Southern Africa. It was mission that led PACE to launch Credible Carbon in 2008 as a separate, legal entity. Credible Carbon is a registered, private company. Its chief aim is to become the most efficient and effective carbon market instrument for southern Africa and to make the market work for poverty alleviation in this region.

So what are the objectives of PACE and how does it relate to Credible Carbon?

PACE is a not-for-profit whose chief job is to act as a project proponent to the Credible Carbon registry. The following objectives are stated in PACE’s constitution and continue to guide the organisation’s intent:

To contribute to sustainable development and poverty reduction in Africa by improving access to renewable energy sources and energy efficient technologies for poor people;

By assisting small-scale renewable energy and energy efficiency projects in Africa to access carbon market revenue in support of their efforts;

To build local capacity and provide support services;

To facilitate small-scale climate change activities in Africa by obtaining finance from private carbon offsets and public financial assistance.

How much of my contribution goes to making a credible carbon improvement in Africa?

In projects registered with the Credible Carbon registry a minimum of 70% of carbon revenue is returned to the project. In recent transactions we have done much better than this. From our start in 2008 until end 2015 we have returned 91% of carbon money to the projecs: that is after registry fees, audit fees, legal costs and project proponent fees have been deducted.

I want to know how my contribution is invested - can I decide which project to support?

You can choose which of Credible Carbon’s projects you would like to contribute to. Because of our strict pro-poor and real emission reduction stance, the Credible Carbon project portfolio may not be as big as some companies, but this is part of the commitment to being credible. When you have selected a project, you can choose to receive project updates to understand the difference that your investment has made.

What's the Kyoto Protocol - doesn't this have a mechanism to help carbon emission reductions in Africa?

Although the Kyoto Protocol First Commitment Period expired at the end of 2012, it was extended to 2020 at the Doha climate change conference in December 2012. The Kyoto Protocol limits to the amount of greenhouse gases that can be emitted by affluent industrialised countries of the world. The Protocol has also established a “Clean Development Mechanism” (CDM) that allows for investment in developing countries. Credible Carbon has a track-record of assisting projects in South Africa with the CDM, but the process is very slow and costly and tends to favour large-scale industrial projects. So Credible Carbon spends most of its time working with voluntary carbon offset contributions, which achieve the reduction in emissions at lower costs and offer greater poverty alleviation potential.

Is my contribution to Credible Carbon just another way of helping rich country Governments to meet their Kyoto Protocol targets?

No! The voluntary carbon credits that you purchase from Credible Carbon are not part of the Kyoto Protocol. Rich countries already have targets that they must meet so the emissions reductions from Credible Carbon projects will be additional – these reductions will not happen without extra funding and funding is used to make further reductions. Rather, the Credible Carbon contributions are used to offset business and personal carbon footprints.

Does Credible Carbon use the Emissions Trading Scheme of the European Union?

For the Kyoto Protocol, industrialised countries have agreed to legally-binding targets for their carbon emissions. Most companies have been given a fixed number of carbon credits that limits the amount of greenhouse gas that they can produce, and will be fined if they exceed this amount. The EU ETS is like a stock exchange for carbon credits. Companies who have spare carbon credits can sell to companies that need credits to avoid a fine – this is done through the EU ETS. But this scheme is only for companies in the EU, so Credible Carbon does not get involved.

How do we know that our offset contributions are really making a difference in Africa?

Unlike other organisations that work in this area, Credible Carbon maintains an updated record of what projects receive support form the carbon offsets, how the project is developing and what has been achieved. The project baseline (how much greenhouse gas is emitted before the credible carbon investment) is prepared at the start of the project, and verified in an independent audit.

What's the difference between a "voluntary carbon offset" and a "CO2 Offset"?

Carbon is often used as an abbreviation for “carbon dioxide” when talking about voluntary offsets. But this is not necessarily the case when talking about other climate change issues such as carbon trading, or carbon footprints. In this case, carbon is referring to any greenhouse gases (GHGs) that contribute to climate change. The most common GHG is carbon dioxide, and this is the one that most of us can do something about since it results from using gas or coal (which often generates electricity). Carbon dioxide is also the standard unit of measurement for emissions – the carbon impact of all other gases is converted into the equivalent amount of carbon dioxide that would have the same effect. Most of our credible carbon projects involve energy efficiency (saving carbon dioxide) or renewable energy (avoiding carbon dioxide). But there are some that target other greenhouse gases, and the effect of these is converted into carbon dioxide equivalent in order to find the value of carbon offsets.

How does Credible Carbon calculate the CO2 emissions?

The carbon calculator on the Credible Carbon website will give you the amount of carbon that is emitted by your current activities at home, during personal travel, in your office building or for business visits. To work out this figure, Credible Carbon usually uses publicly available figures that convert energy use from different fuel sources into CO2 emissions. The only major exception is for electricity use, where the conversion rate differs depending on the composition of energy supplying the energy grid in specific countries. For large projects traded by Credible Carbon independent auditors are used to verify carbon savings.

Why do the carbon offsets from other organisations have different prices from Credible Carbon?

The price of a carbon offset is based on the cost of reducing an equivalent amount of carbon in a given project – the “marginal abatement cost”. The cost or reducing a unit of carbon will differ across projects depending on their specific activities. In general Credible Carbon seeks projects that have a significant impact on poverty and emissions at a reasonable cost. Credible Carbon acknowledges its need to be cost-competitive relative to the global emissions reduction market, but has concerns about the impact of expedient large-scale industrial projects on the global carbon price – a concern that is shared by the World Bank, DFID, WWF and clearly articulated in the Stern Review (2006).

Credible Carbon pledges not to compromise the quality of its projects or the credibility of its off-sets by pursuing dubious, cheap off-sets.

https://wepower.network

How WePower’s blockchain-based energy financing will revolutionize traditional financing for renewable energy systems

Mobilizing finance for investment and innovation in low-carbon renewable power systems is a key driver for climate change mitigation.

There are currently many ways to finance renewable power systems including traditional private equity financing, tax equity, renewable energy bonds, leases, power purchase agreements and more recently crowdsourcing, property assessed clean energy, virtual net metering and other creative methods for financing renewable energy projects.

Traditional project finance is subject to geographic, government, and regulatory uncertainty based on different rules and regulations depending on where renewable energy systems are being developed. As well, a major bottleneck limitation with traditional renewable energy financing is that most projects require power offtake agreements such as Power Purchase Agreements (PPAs) to be in place before financing is approved creating many risks for developers. This creates a situation where many projects are not approved due to the financing methodologies requiring that the entire projects output be accounted for over the life of the project typically 15 to 20 years. What this typically means is that the entire energy output of the renewable power system must be bought with a guarantee for the life of the project limiting projects to those who can commit to 15- 20 years of green energy purchases.

WePower is a blockchain-based green energy trading platform. WePower enables renewable energy producers to raise capital by issuing their own energy tokens. These tokens represent energy they commit to produce and deliver. Energy tokenization standardizes, simplifies and opens up a globally energy investment ecosystem. As a result, energy producers can trade directly with the green energy buyers (consumers and investors) and raise capital by selling energy upfront, at below market rates. Energy tokenization ensures liquidity and extends much needed access to capital.

Energy tokenization ensures liquidity and extends much needed access to capital.

WePower’s energy tokenization platform will open up the green energy markets globally to a broader pool of investors over time. In an open platform that is not controlled by any one centralized entity, new energy projects do not depend on only local investors but to anyone who wants to trade green power.

Asset liquidity allows more favorable capital-to-debt ratios without using Government subsidies. By effectively reducing the soft costs for renewable energy systems, this can reduce the overall financing process as well as reduce risk to green power system developers. Here the risk is shared between the renewable energy producers and consumers/investors. As well, the WePower platform can be used to finance a more distributed energy system over time by supporting advanced localized power systems such as nanogrids, microgrids, and peer-to-peer energy trading schemes over the medium term. As well, the WePower platform can be used to support advanced new structures that are emerging in places like California like Virtual Net Metering (VNM), Community Solar developments, as well as Community Choice Aggregation (CCAs) enabling entire communities to invest in localized power systems.

WePower’s energy tokenization platform will open up the green energy markets globally to a broader pool of investors over time.

Over time as WePower builds out its blockchain-based green energy trading platform and specifically creates a larger capacity network, many new players will be able to participate in financing projects. Over the longer term, this same platform will be able to enhance the process of tokenizing Peer-to-Peer energy trading systems as well as provide value to emerging Distributed Energy Resource (DER) aggregators and systems operators.

With WePower, we truly have all the characteristics of a winning technology that can close the gap between traditional financing methods and next-generation, blockchain-based finance and operating systems for energy trading as well as future microgrid-based energy system operations.

WePower Engineering team’s blog #2: TOP 5 questions from the community

Community, hello from Estonia!

It is time for WePower’s engineering team update. This time, we have asked our community management team to gather the most trending WePower engineering development related questions which have been shimmering around in our social platforms.

Please take a closer look what is our community most interested in and what the answers to these development questions are.

1. What is currently WePower’s engineering teams working on in Europe and Australia?

Currently, the team is working on the internal non-public proof-of-concept platform. The platform functionality and logic has been broken into several “blocks”, currently they are: auction, trading, blockchain, portfolio management and migrating the community to an auction. These are the functional building blocks of the public WePower platform. The main effort is currently on the auction block. Release of the Alpha version of the platform is planned in April.

WePower is projected to delivering fundraising auctions to its pipeline of renewable projects in Q4 of this year. This is the current and main focus of the engineering team. Piloting in Estonia is an associated challenge — certain necessary technology proofs need to be completed in order to make sure auctions are reliable.

Despite the fact that the Engineering team is geographically distributed, they are all one team. It’s true that the parallel development in Australia within the confines of the Startupbootcamp activity might be rolled into the over development, nothing is treated as independent. The team uses Agile software development techniques as its design principal, so the geographical location of the teams are irrelevant to the piece of programming that they are working on.

2. What is current pilot projects status in Estonia? What are the next steps in launching pilot?

The team is working with Elering to determine the feasibility of using Ethereum for smart contract application and transparency for the long-term. This is all possible in theory, but work has begun in earnest to determine if it is possible in the real world and working with high volumes of tokenized energy. That is why working with Elering and having access to their Estifeed data hub, which has all data about produced and consumed energy in Estonia, is so important not only for WePower but to the energy industry.

We are also working on preparing to access and inject the anonymous user data into the platform to test tokenization of energy. The pilot is launched and ongoing! Our Estonian tokenization project that we plan to launch in August should be the biggest blockchain application in the energy sector giving a major push towards energy digitalization globally.

The Elering pilot will be ongoing and evolving, as the long term goal is to also connect 220 Energia and Eleon windmills in Estonia into a fully working pilot ecosystem that could support development of all three phases of engineering goals as laid out in the WePower whitepaper.

3. What technical developments have to be implemented so WePower could be launched and energy producers could start raising money for their energy projects?

The above mentioned “auction block” is the piece that is being worked on the most at this moment. There are also non-technical activities currently underway such as building the pipeline of renewable energy producers that will be the first “projects” to come on to the platform and sell energy tokens to support their development. The goal is to have not only solar projects, but also wind and hydro projects because all “three energies” present different technical integration scenarios.

The WePower business team is preparing a separate update, but I can ensure that both teams are moving forward very fast. Stay tuned!

4. Has there been any major milestones accomplished last few weeks on infrastructure or technology?

The team uses Agile development as a design principal. Within that they use a concept inspired by scrum, specifically the idea of development sprints. A sprint is a week of time that focuses on specific development goals or objectives and evolves as development progresses. If a mayor milestone has been achieved — the community will know about it. In the last weeks the design and scope of the first platform release — that will allow the first renewable energy auctions to start marketing their auctions — is nearing scope lock. So we hope to have it out in April with the corresponding energy token model that we plan to use for the first auctions.

5. When will the results of the pilot project be announced?

I would like to start by saying that our platform first alpha release is planned for second half of April. We will be gradually inviting more and more people to check out how the platform works, give feedback & suggestions.

Soon after the first release we will have an update allowing registration of potential green energy producers and energy buyers across the globe.

The full Estonian energy tokenization is planned for August. Our team is working together with Elering’s engineers to show the world the biggest blockchain application in the energy sector! Our team is planning a very special event for this occasion, so get ready to save the date!

The role of Smart Meters in WePower’s quest to make the world greener

From the very beginning WePower’s vision has been focused on building a green energy trading solution that would accelerate the world’s transition to sustainable energy sources, through the power of digital technologies and communities across the globe. WePower is starting with a set of functionalities that will allow anyone to invest into new green energy developments. However, there is a much broader scope of services that WePower’s technology will enable as it scales.

My name is Heikki Kolk. I am the Chief Engineer at Catapult Labs as well as WePower’s advisor on Smart Grid and Energy IOT topics. In this article I would like to share with you a short overview on what smart metering systems are and how they will help WePower bring energy services to the digital world.

What Smart meters are and why we need them?

Smart electricity meters are electronic devices that record consumption of electric energy in intervals of an hour or less, and communicate that information, at least daily, back to your utility. This relatively simple technology shifts the way your energy consumption is measured quite drastically. Instead of you reporting your energy usage every month to your utility company, and then getting billed based on an estimated energy cost, with smart meters your utility can calculate your real energy use on daily basis and bill you based on the energy price for every given day or even hour.

There are a few other important benefits that a functioning smart metering system can provide:

smart meters can help you connect the energy you purchase to its source, which creates an opportunity for a set of new services that will allow you to purchase energy from the source of your preference;

smart meters provide a better understanding of how each of us uses energy and helps us find ways to optimize our usage habits, doing this can save money on your energy bills;

with smart meters your utilities can better understand how the energy is produced and consumed at your city, state or country level. This helps them manage the system better and thus lower energy costs as well as identify system malfunctions much faster and fix them before the system fails.

WePower IOT expert Heikki Kolk explains the role of Smart Meters in the WePower vision.

Smart meters are currently more commonly found in industrial facilities, such as plants, data centers, warehouses and factories. However, many countries across the globe are working on a nationwide smart meter system roll out to cover the entire country. For example, the European Commission has set a target for member states utilities to reach 80% smart meter deployment for all customers by 2020 and to develop a business case to support the further adoption of smart technologies.

Why smart meters are important to WePower?

The basic smart meter functionality at the energy production sites will primarily be needed for a transparent energy production accounting and smart contracts. Smart meters will provide WePower the ability to transparently record the fact that you purchased green energy at a given time for a specific value, and create functional power purchase agreements in form of smart contracts, which you will be able to hold for a future date or sell them back into the marketplace. This is something that does not exist today in energy.

However, with the growth of country-wide smart meter adoption, WePower will start introducing a full range of virtual utility services. Data from the smart meters will allow WePower to build data management and analytics tools that will help your utility providers manage the energy infrastructure much more efficiently. WePower will also be very well positioned to build a developer toolkit so that new services could be built on top of it with the same ease as mobile apps are today.

What WePower proposes for the green energy marketplace is a powerful new tool that can give a whole new dimension to how people and organizations interact, invest, and trade with green power. Transition to green energy is needed more than ever. I am certain that with WePower we will get to the green world much faster.

Why should I join WePower? Practical examples.

The WePower business model is presented in a whitepaper. After reading it, most likely, you will consider WePower from several different perspectives:

The perspective of a renewable energy producer

The perspective of an investor or producer in today’s energy market

The perspective of an energy consumer

The perspective of a contributor (those holding WePower tokens).

This article will concentrate on the key problems WePower addresses and the benefits it provides for each of the above-mentioned groups of persons.

Renewable energy producer

Let’s say that you are a developer of renewable energy (solar, wind, hydroelectric) plants. You have a great amount of experience and a proven track record in the renewable energy sector. You have just bought a land in, for example, Portugal. The sun shines there for more than 300 days a year. It’s a perfect place to develop a renewable energy plant and to produce and sell energy at the market price. You can already imagine the social and monetary rewards of being a green energy producer.

As an experienced renewable energy producer, you know that a 1 MW energy plant will cost you around EUR 900,000 — EUR 1,000,000. You know that you will need an additional EUR 700,000 to achieve this goal, and this cannot be done without debt financing.

You come to your bank and tell your friend, who is the bank’s manager, that you have an amazing project and you need cash to start it. Unfortunately, your banker friend says that 30% of your own funds is not enough. Subsidies are gone. The project is considered too risky and the bank now requires a debt to equity ratio of 50:50.

However, you are confident that your project is great and will succeed, so you start looking for the needed capital. In the end, you realize that this will be a long, costly and unpleasant process. The search for equity capital will cost you somewhere around 3% to 5% of the total project cost. This does not even guarantee that you that you will get the necessary capital. You start struggling, but your friend tells you about a new company that has now emerged from the energy market — WePower.

After some consideration, you decide to give WePower a try. The green guys from WePower do their due diligence and tell you: “Hey, you can sell part of the energy to be produced by your project in the future upfront by using our blockchain-based platform and smart contracts.”

OK, this sounds a little scary, but you need that capital and you give WePower another try.

The green guys allow you to sell the energy to be produced in the future upfront for the amount of EUR 200,000. This amount of energy is tokenized using WePower and sold in the form of energy tokens to the energy buyers/investors using WePower. However, you sell this energy lower than the current market price — you are hedging on future sales to get the capital you need right now. You get the required equity capital and go to the bank to get the rest of the funds. Once you start construction of the plant, you connect it to the platform and start providing energy to the grid. At the very moment the green energy is produced and has reached the grid, the energy tokens are burned and represent the claim of the buyer/investor to receive the proceeds of the energy liquidation. This is done via smart contracts, according to the power purchase agreements, and is accomplished with full transparency, speed, and liquidity.

So, what does this mean for you?

1.You don’t need to get an additional investor and you can acquire the necessary equity amount needed to get debt financing. Even though you may already have the necessary funds for such a project, you could scale up even faster with the WePower model.

2.Your return on equity ratio (ROE) will increase by up to 25%, which means that you can reinvest more funds into the production of renewable energy. How did we arrive at these numbers? Simple. Once the delivery of energy according to the initially concluded smart contracts has been accomplished, the producer can begin selling the rest of the energy produced at the market price. The producer receives the full benefits of the plant’s energy sales, sharing the benefits of lower energy prices with the consumers and taking advantage of the higher future income flow with less capital initially invested.

Investor/energy market maker

As an investor, you are looking for highly profitable, safe and liquid investment options. Investments in the energy market rarely cross your mind.

This sector is usually only open for guys with deep pockets — guys like institutional investors. Suddenly you meet the green guys from WePower, and they invite you to explore WePower as a blockchain-based renewable energy trading platform with the goal of becoming the next generation utility company.

WePower allows you to buy renewable energy that will be produced in the future.

STOP.

Renewable energy that will be produced in the future? Yes, you are right!

You are buying a tangible asset that has been agreed upon — green energy. You are buying it for a price lower than the market price and selling it whenever you want to — directly on the WePower platform. Today you could fix the energy price at 0.039 Eur/kWh, while the market price is 0.047 Eur/kWh, and your return, depending on when the energy is produced, could be crazy — up to 17–20%.

But then you may think: “Wait for a second, but what I will do with the energy I have bought?” You can either use it if WePower is operating in your country as a renewable energy user, sell it on the market before the energy is produced, or simply do nothing. If you choose to do nothing, this energy is automatically sold on the global energy exchange market and you get the margin resulting from the difference in the price paid for the energy and the market price, which should grow each year.

When looking at your investment using WePower, you feel happy. Your investment is backed by real, tangible assets — green energy. Due to smart contracts, it is liquid. You can always see how your investment is doing on the public blockchain. You are putting more funds into the energy sector, because by doing business, you also doing good, by supporting the adoption of renewable energy.

The same thing applies to energy market makers. They can fix the energy price and hedge it with a liquidity option, which can be executed when they want to.

Energy user

It works the same way for investors. You are buying future energy at a discount and saving the price difference between the price paid now and the future market price when the energy is produced. WePower, as an independent energy supplier, has the right to provide you with the electricity. However, WePower can only provide you with this service when it enters your market.

This might take some time, but with your help, WePower can become a global business.

Moreover, nowadays you cannot choose what kind of energy to use. It’s always dirty energy, and its production pollutes our planet. With WePower, you could choose what kind of energy you want to buy and always be able to observe its production on the public blockchain. You would always get green certificates, allowing you to see how much CO2 was cut and how you have contributed to a better world.

Contributor

As a contributor, you may ask yourself whether you need WPR tokens in your crypto wallet. You, just like any one of us, don’t like paying bills, right? Imagine a world where you don’t have to pay for your household’s electricity consumption. It’s a good feeling. With WPR tokens, it could become a reality.

Renewable energy producers using WePower are required to donate part of the energy to the community — to the token holders. This means that token holders constantly receive green energy as a reward for contributing to the platform. Constantly. If the expansion of WePower is successful, the amount of the green energy donated grows by a huge amount. The energy you receive will allow you to forget energy bills or sell the energy and use the proceeds from it to cover the same energy bills.

Whichever of these groups of people you belong to or about to become a member, WePower brings not only the value of being green or acting green. By now you can see yourself, that our platform is able to generate financial benefits along with the personal satisfaction of doing good and making the change happen.

And frankly, you are one click away from becoming a part of this change.

WePower: Green energy for all Europeans

Many of you are familiar with the climate challenges the World is facing today. Carbon Dioxide levels in the air are at their highest in the last 650,000 years, seventeen of the 18 warmest years on record have occurred since 2001. A strong and focused action is needed more than ever. However, very few understand that in order to get the climate change challenge solved we need to take planed and structured steps with the technical realities of the existing energy infrastructure taken into consideration.

Team from Statnett, a Norwegian Transmission Systems Operator visiting WePower

This is the approach we have started WePower with. Thus far, it has been an instrumental pillar helping us to establish shared work directions with our infrastructure partners Elering, 220 Energia and Eleon as well as gauge the interest from other energy companies across the Europe. Actually, just a couple weeks ago Kaspar, our CTO, has shared our learnings with a team from Statnett, a Norwegian Transmission Systems Operator.

Given this context, I want to use the opportunity here to introduce you to the broader context of the European energy market. This article should give you a better understanding of where the amazing traction of WePower is coming from and why WePower in just a few years might become the key technological solution facilitating energy system transition towards a clean and sustainable future.

Clean Energy for all Europeans

The European Union has consistently been at the forefront of the clean energy adoption and policy innovation. Back in the 1992, the Maastricht Treaty set an objective of promoting stable growth while protecting the environment. In 1997, the Amsterdam Treaty added the principle of sustainable development to the key strategic objectives of the EU. In 2004, the EU defined an ambitious goal to obtain 20% of its total energy consumption requirements with renewable energy sources by 2020. This has meant a 235% increase from the 7% share starting point in a period of just 6 years.

EU’s very systematic approach has led to the share of energy from renewable sources doubling since 2004, to about 17% of final energy consumption. In some EU countries, clean energy has come close to dominating the energy consumption mix — Sweden is at over 50% and Finland is at over 40%. Norway and Iceland, which are the European Economic Area members, have already reached 70% and 73% share respectively.

No ”Plan B” for climate action as there is no ”Planet B”

A big part of the EUs policy efforts has been related to the energy infrastructure improvements. Every country is encouraged to implement smart metering systems that would on one side assist the active participation of consumers in the electricity markets and on the other side would help utility companies and grid operators plan and manage energy grids more efficiently. The EU aims at replacing at least 80% of its electricity meters with smart meters by 2020. This just by itself equals to €45 billion investment into the digitisation of energy infrastructure all across the Union and a vast amount of new opportunities for new services that could be built on top of it.

We have built WePower’s strategy and development roadmap particularly around these changes. They will enable WePower to be at the forefront of the European energy revolution by creating new layer of smart energy services for the decades to come. Our partnerships with Elering, 220 Energia, Eleon and other renewable energy producers show that different energy market participants are also preparing for the change together with us.

The Infrastructure challenge

All these developments have set out a great start towards a smarter, cleaner and consumer driven energy system but at the same time brought a number of major challenges to the energy companies and energy infrastructure managers.

One big challenge has come from the fact that the increasing penetration of renewable energy production into the energy grids increased the complexity of operations required to run and maintain this infrastructure. Energy is a system that needs to be constantly balanced so that the production meets consumption and the other way around at all times. The issue with renewables is that they are variable, hard to predict and thus manage at large scale by their nature. We cannot control the sun, wind or the clouds in the same way as we can control energy production from the fossil fuels. Management of this complexity is one of the biggest challenges preventing faster green energy adoption.

Another big challenge is the financing, or perhaps even more, the monetisation of the new infrastructure. The cost of installing a smart meter in the EU is between €200 and €250 per household on average, which sums up to very large investment amounts when we take the size of region and countries into the consideration. This means that the energy companies cannot just have these systems implemented and running to tick a regulatory box. They need to proactively find solutions that could use the newly implemented infrastructure in a way that would increase the efficiency of their ongoing business operations and also enable new consumers services.

Video from Kaspar Kaarlep’s series covering technological aspects of energy sector and its digitalisation

WePower is an enabler

The fact that the European energy sector needs solutions that would create a new layer of services on the digitised grid infrastructure puts WePower in a very attractive position. WePower platform in its first phase offers an open green energy financing and trading platform that provides a simpler, transparent and globally open solution to the currently existing energy investment ecosystem. WePower will help energy companies to run green energy project development process much easier and also tap into the global capital flows for their funding.

In our second and third phases we are expanding the platform even further to offer energy infrastructure management tools and services. They will be particularly tailored towards the challenges the energy companies have with an increasing penetration of green energy production in the grids. The fact that WePower platform is digital and will be scaled across the countries will also provide an opportunity to run cross-border trading activities all across the Europe.

WePower will help energy companies to run green energy project development process much easier and also tap into the global capital flows for their funding.

We have already started our platform tests in Estonia in partnership with energy companies on the energy production, transmission and retail sides. The learnings that we are getting are applicable to nearly all markets in the European energy ecosystem. Once we launch the platform, it will be easily scaled across most of the European countries. We already see a strong interest from other companies in Europe in our offering and we will soon be announcing new European partnerships that we have been working on over the last few months.

All of this indicates that the timing of WePower in Europe is perfect and the application of our solution is much needed. Europe has got an ambition to create an integrated Energy Union powered by clean energy and consumer choice. WePower is built with the same ambition in mind and is heading with a good traction towards becoming one of the centre points of the green European energy union.

We will use the developments happening in Europe to promote WePower blockchain based solution as a way for Europe to offer new services to energy users, which will both benefit them and increase renewable energy adoption. These developments open doors to a large scale WePower token application in Europe, where each European gets value from the innovation brought by energy tokenisation and the WePower system.